On-Premise vs The Cloud: What you need to know

To have a data-driven culture in your organisation, you need to have a modern data stack (MDS) in place. A data-driven organisation prioritises data as a key resource for decision-making, strategy formulation, and operational efficiency. This approach involves collecting, analysing, and leveraging data to guide actions and strategies at all levels of the organisation.

The beauty of cloud technology, which makes up an MDS, is that you can reach a data-driven culture more efficiently i.e with quicker deployments, easier cost management and by giving users access to tools which help them deliver and innovate towards your data strategy.

There are benefits and risks attached to Cloud Infrastructures, they come with everything. MDS is only as good as an organisation's data strategy and leadership; the right people and processes need to be in place to reach its full potential. For example, do you have resources in place to implement or migrate the technology? How will existing roles change and are your teams prepared? Who will maintain the communication between business and technical stakeholders continuously

These questions may be hard for you to answer or maybe they can only be answered once you know what technology you need? It’s a lot to think about! If you haven’t got a data strategy or don't know where to start, we recommend you check out our other blog here. To help with the technology side of things, the rest of this blog will look at the difference between on-prem and cloud infrastructure, along with key factors to consider to help guide decisions on whether to adopt Cloud or not.

1. Cloud vs On-Premise: The Key Features

For this article, when we mention on-premise and cloud, we refer to computing models or infrastructure for data ingestion, storage and computation. With On-Premise being the traditional data Infrastructure and with the rise of cloud infrastructure; it's no wonder there are questions around whether it’s a good idea to move to the cloud or not.

For example, why do organisations want to move data from MS SQL Server to Azure? Is cloud technology the right fit for your people and business? Can you have both?

Once you have a Cloud Infrastructure it opens doors to many other technologies that replace custom / human resource-heavy tools and solutions. The diagram below from Google, shows this clearly, along with the differences between on-prem and levels management across all.

Google, however, is not the only Cloud Service Provider (CSP) and most On-Prem vendors like Microsoft and Oracle now provide a cloud version which can be used for infrastructure or its on-prem version can be containerised / hosted within an IaaS, which are the foundations of Cloud Computing. See some examples in the tables below:

1.1 On-Premise vs Cloud: Technologies

1.3 Key Features of an On-Premise Computing Model

On-premise computing refers to the traditional IT infrastructure setup where all hardware, software, and data are physically located within an organisation's premises. This model requires the organisation to purchase, install, and maintain its own servers, storage devices, and networking equipment.

Key Features:

• Control: Full control over hardware and software.
• Customisation: High level of customisation to meet specific needs.
• Security: Perceived higher security due to physical control.
• Capital Expenditure: High initial investment in hardware and software.
• Maintenance: Responsibility for ongoing maintenance and upgrades

Those that are currently comparing on-premise to cloud, will understand that cost and staff overheads tend to be higher with the initial setup and maintenance for On-Premise technologies. However, businesses choose to stay with the on-premise model predominantly for security and control reasons.

1.4 Key Features of a Cloud Computing Model

Cloud computing involves delivering computing services (servers, storage, databases, networking, software, etc.) over the internet (the cloud). These services are provided by cloud service providers (CSPs) such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP)..

Key Features:

• Scalability: Easy to scale resources up or down based on demand.
• Cost Efficiency: Pay-as-you-go pricing model reduces initial capital expenditure.
• Accessibility: Services are accessible from anywhere with an internet connection.
• Maintenance: CSPs handle maintenance, updates, and security.
• Agility: Faster deployment of resources and applications.

Because of these managed services, cloud may require less overhead than an on-premise model yet it still needs to be owned by someone or a team depending on the complexity of your data and strategy. Another advantage of cloud computing is its compatibility with other cloud types (from CaaS) and the ability to host On-prem data sources which improves observability and monitoring as well as faster deployments so that your business can get access to data more efficiently and governance and data is aligned.

It also means that for those on-prem data sources that your organisation must keep or aren’t quite ready to move to the cloud, you can keep some of the on-prem technology and create a hybrid model by hosting on-prem data sources on the cloud to get the best of both worlds!  For example, an organisation that wants an analytics layer in the cloud so their analysts can use SaaS tools such as dbt and Tableau Online, but keeps operational data on prem i.e. an ERP.

2. Cloud vs On-Premise: Key Factors

Of course, there are ‘pros and cons’ for both On-premise and cloud computing models and the impact of the ‘pros and cons’ is dependent on your business needs and values.  

Below, we have summarised some key factors to consider when making a decision yet we would also recommend speaking to vendors for more information as they all have their own benefits:

Key Factor 1: Cost

On-Premise: High initial costs for hardware and software; ongoing costs for maintenance and upgrades.

The Cloud: Lower initial costs; operating expenses based on usage. Costs may be higher for services that require greater security and more complex deployment methodologies.

Key Factor 2: Control & Security

On-Premise: Complete control over physical hardware, networking and data security.

The Cloud: Shared responsibility model for security; data is stored off-site, which might raise concerns for sensitive data yet it's always best to speak to the vendor with regards to service and networking solutions.

Key Factor 3: Scalability

On-Premise: Scaling up requires purchasing and installing additional hardware.

The Cloud: Resources can easily be scaled dynamically based on demand. These costs can be monitored easily too and you only pay for what you use.

Key Factor 4: Compliance

On-Premise: Easier to meet regulatory requirements with full control over data.

The Cloud: CSPs often have compliance certifications, but organisations must ensure their own compliance.

Key Factor 5: Availability

On-Premise: In-house / Physical deployment/ Local Installation. You will need to consider who will need access to the infrastructure and how it will be used also.

The Cloud: Each provider has region and multi-region options to host your service. This impacts cost and performance and its important you choose the regions not only for performance but also in line with Security and Legal policies i.e. to avoid single point of failure and GDPR rules.

Key Factor 6: Performance

On-Premise: Potential for higher performance due to proximity of resources.

The Cloud: Performance can vary depending on internet connectivity and CSP infrastructure.

Key Factor 7: Maintenance & Support

On-Premise: Requires in-house IT staff for maintenance and support.

The Cloud: CSPs handle most maintenance tasks, reducing the need for a large IT team.

Key Factor 8: Flexibility & Innovation

On-Premise: Limited to the capabilities and compatibility of owned hardware and software.

The Cloud: Access to a wide range of services and tools, enabling rapid innovation.

This is by no means an exhaustive list and it's important to take time with your decision and understand your needs and goals. It can be overwhelming speaking to lots of vendors too. At Biztory, we have access to expert consultants and partners and can therefore be your sole point of contact if you want to know more or need help with your decision.

3. Cloud vs On-Premise: Deployments

Because the features between on-prem and cloud infrastructures are different, so are their deployment models. It is important to understand these as they could help address some of the questions or worries you may have around resource, cost and security.

An on-premise deployment would require software applications to run on computers and servers that are created within the organisation's physical premises. A cloud deployment consists of services and deployment models provided by services from companies such as AWS, Microsoft Azure, GCP and Snowflake, each have their own security measures for Encryption, Identity Access Management (IAM) and monitoring too.

The image below summarises the key elements and differences for On-Prem and Deployments:

Again, choosing between on-premise and cloud computing with regards to deployment models depends on an organisation’s specific needs, including cost considerations, control requirements, scalability, compliance, performance, and maintenance capabilities. Understanding the key elements and factors involved in each model helps organisations make informed decisions that align with their strategic goals and operational requirements.

For example, if a business objective is to downsize the IT team and increase data roles within the business, perhaps cloud is the way forward. Alternatively, if a business has no data infrastructure in place and is looking to provide one from scratch then it's worth looking at what data can be collected now and what information or products will the business need to return on investment, before looking at data infrastructure and architecture.

4. When not to move to the cloud

This blog has favoured Cloud technology more than On-Prem. There are good reasons as to why. However, there are some specific reasons why you should not. While cloud technology offers numerous benefits, there are certain scenarios where moving to the cloud might not be the best choice for your organization. Here are some key reasons to consider staying on-premise:

1. Regulatory Compliance and Data Sovereignty
For organisations in highly regulated industries, such as healthcare, finance, or government, strict compliance requirements may dictate that data must be stored within specific geographical boundaries or under specific security protocols. If your cloud provider cannot guarantee compliance with these regulations or if there are concerns about data sovereignty, an on-premise solution may be more appropriate.

2. High Sensitivity and Confidentiality of Data
Organisations handling highly sensitive or classified information may find it risky to store data off-site, even with the strongest encryption and security measures offered by cloud providers. If your business deals with confidential or proprietary data that requires tight control and oversight, keeping it on-premise can provide an added layer of security and peace of mind.

3. Legacy Systems and Applications
Some organisations rely heavily on legacy systems and applications that may not be compatible with cloud environments. Migrating these systems to the cloud can be complex, costly, and sometimes impractical. In such cases, maintaining an on-premise infrastructure might be more efficient and cost-effective.

4. Cost Considerations
While cloud solutions can be cost-effective for many businesses, they may not always be the cheapest option, especially for companies with stable, predictable workloads. The pay-as-you-go model of cloud services can lead to unexpected expenses, particularly for data-intensive applications or services that require high levels of availability and performance. For some organisations, the upfront capital investment in on-premise infrastructure can be more economical in the long run.

5. Control and Customization
On-premise infrastructure offers unparalleled control and customization, allowing businesses to tailor their IT environment to specific needs. If your organisation requires unique configurations or has specialised hardware needs that cloud providers cannot accommodate an on-premise solution might be the better choice.

6. Performance and Latency Concerns
Certain applications require ultra-low latency and high performance, which may be better achieved with on-premise infrastructure. While cloud providers offer robust services, the physical distance between users and data centres can introduce latency issues that could impact the performance of real-time applications, such as financial trading platforms or high-frequency data processing systems.

In summary, while cloud technology is often advantageous, there are specific scenarios where an on-premise solution is more suitable. The decision to move to the cloud or stay on-premise should be based on a thorough assessment of your organisation's unique requirements, regulatory environment, and long-term strategic goals.